Why Gold Slumped; Why It Will Come Back
The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.
NEW YORK (TheStreet) -- There are two reasons why the gold market, and indeed the entire commodity sector, got stuffed last week.
First, the "counterfeiter in chief," Federal Reserve Chairman Ben Bernanke managed to disappoint the gold market by deciding to sterilize the bond purchases made on the long end of the yield curve.
By offsetting the purchases of short-term Treasuries with sales of shorter duration notes, Bernanke will not increase the supply of money or dilute the currency to a greater extent than he already has in performing Operation Twist.But make no mistake, the global economy is faltering, and QE3 isn't far off. However, the gold market was expecting the Fed to do more in the way of easing during its latest two-day meeting -- like ceasing to pay interest on excess reserves. Therefore, in the short term, there will be selling pressure on all commodities.
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